Actual small and medium sized business owners in Pennsylvania - the real job creators - calling for compromise in the debt deal. I hope that Congress is listening.
The Philadelphia CEOs are articulating exactly the general solution most economists advocate and the IMF has called for. Unfortunately, while in business compromise can readily be reached over economic/financial issues, in politics the reality is more complex. Currently, the debate has taken an almost theological air. On one hand, a significant number of Republicans have committed themselves to a pledge not to raise taxes and that pledge has a very stringent definition as to what would constitute a tax hike. On the other hand, many Democrats see the mandatory spending programs as a policy compact to the nation's older peole that should not be violated. These have become almost identity issues. As such, those who hold the above views find it difficult to accept compromises, as they fear that their accepting compromise would undermine the raison d'etre of their respective political parties as they perceive it, not to mention their own credibility.
With strong leadership in either the Congress or the White House, I believe a compelling case could still have been made by which a "grand bargain" could have been struck. The issue would have been tied to the nation's destiny in general and its ability to provide core programs/services that the public desires, as well as national security, in particular. Failure to put the nation on a sustainable fiscal course could only jeopardize core programs and services and put the nation on a path of relative decline vis-a-vis numerous other states. It speed a shift in the balance of power against the U.S. It could lead the nation to confront a period of struggle and renewal that would be far more painful than if early action were undertaken. Hence, the leaders would have acknowledged that although the grand bargain put each side in a bad position on specific policy changes, even violating narrow policy commitments, the larger cause of putting the nation on a more secure path justified such an extraordinary agreement. To be sure, genuine political courage would have been required. The President, House Speak, House Minority Leader, Senate Majority Leader, and Senate Minority Leader would have had to have been prepared to tackle obstacles to the grand bargain, mainly neutralize and isolate those taking the course of intransigence (certain Democrats from the progressive wing and certain Republicans, mainly a chunk of the freshmen).
Unfortunately, I don't believe the political leadership has been up to the task. One has witnessed the exertions and, to date failures, of well-intentioned but fairly weak leaders. Speaker Boehner's hands have been tied by some of his own caucus. President Obama's ability to pursue common purpose was squandered in his advocating a health reform initiative that was bitterly opposed by Republicans. Bad negotiating process that encouraged the parties to start from their maximum positions, rather than from the standpoint of offering sustainable opening positions contributed, wasting precious time. Bringing the debate before the public hurt things further. Sensitive negotiations should be conducted privately. Public airing of such talks invites posturing and rigidity, as the parties aim to demonstrate strength and avoid perceptions of weakness.
In the end, democracy is the most effective system for coping with and adapting to ongoing and evolutionary change. However, for democracy to be effective, there most be a strong willingness among participants to reach and respect consensus (even if individual positions and desires are not fully met) and to compromise to bridge differences (meaning that all sides need to retreat from their maximum positions and accommodate one another's core needs). Unfortunately, the debt ceiling talks--even as I fully expect the debt ceiling to be raised in a timely fashion--has exposed political dysfunctionality in Washington in which the willingness to build consensus and to compromise are lacking. The near absence of such attributes has drained the nation's political system of the flexibility that makes democracy effective. There will be fallout even when the impasse is resolved. For example, creditor nations, particularly China, will have a greater incentive to diversify their portfolios due to the added risk associated with the U.S. That will mean somewhat higher interest rates in the future and reduced foreign appetite for Treasury securities. Those developments will have macroeconomic implications for the U.S.
In part, I believe weak leadership has contributed to the outcome. If that were the only issue, it would be a less serious matter. In part, I also believe the outcome is exactly the result of the public's choice of elected officials who pursued office on uncompromising platforms and are now holding fast to those positions (basically delivering as they committed themselves). Apparently, the public is just learning that "Caveat Emptor" applies to politics, too. The selection of "theologians" so to speak may be a more structural and longer-lived problem even if it recedes for a time following resolution of the debt ceiling issue. Hence, there is little assurance that the 2012 electoral outcome would fully address the political dysfunctionality problem. In the medium-term and beyond, even as far tougher decisions will be required, that dysfunctionality could increase prospects of a debt crisis. Of course, there remains a small prospect that the U.S. could engineer a self-inflicted debt crisis in coming weeks that one analyst aptly termed "debt suicide."